James Knightley, Chief International Economist at ING, notes that the August US jobs report shows payrolls rose 201,000 versus the 190k Bloomberg consensus.
Key Quotes
“July was revised down 10k with a 40k downward revision in June. The unemployment rate remained at 3.9%, but the big story is the pick-up in wages. It surged 0.4% month on month to 2.9% year on year versus the consensus 0.2% MoM/2.7% YoY.”
“This report is strong throughout and with the economy likely to grow more than 3% again in 3Q18 it will keep the Fed hiking interest rates with another move in September with a further increase in December.”
“After today’s report (and the negative revisions), payrolls have on average risen 207,000 per month in 2018 versus 182,000 per month in 2017. The biggest constraint on payrolls growth going forward is likely to be finding people with the right skill set.”
“The wage growth number of 0.4% MoM (highest since last December) is really powerful given statistical headwinds.”
“The unemployment number of 3.9% also reflects some revisions and is above the 3.8% low in May. However you have to go all the way back to 1969 to find a sub-3.8% figure.”
“So despite all of the worries about the impact from protectionism, Fed rate hikes and emerging market woes, the US economy continues to roar ahead.”
“We look for GDP growth of 3-3.5% in 3Q18, but the Atlanta Federal Reserve’s NowCast GDP model suggests it could be even stronger at 4.4%! Inflation is grinding higher and the jobs market remains robust.”
“As such the Fed’s message that monetary policy remains “accommodative” is accurate so we fully expect officials to continue with the strategy of “gradual” policy normalisation. To us, this suggests a rate hike in both September and December.”
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